Morgan Stanley Q2 Profit More Than Doubles

(RTTNews) - Investment bank Morgan Stanley (MS) reported Thursday that its second-quarter profit more-than-doubled from last year, boosted by a tax benefit as well as slightly higher revenues. Among segments, institutional securities division posted lower revenues, while Wealth Management and Investment Management segments performed well.

Chairman and Chief Executive Officer James Gorman said, "Our quarterly results demonstrated solid performance, despite a muted operating environment. We are seeing momentum across our businesses, with particular strength in Investment Banking, Equity Sales & Trading and Wealth Management - where profit margins hit 21 percent for the first time since the founding of the JV and assets entrusted to us by clients reached $2 trillion. We also continued to be disciplined on expenses, while focusing on delivering higher returns."

For the second quarter, earnings applicable to shareholders surged 131 percent to $1.86 billion from last year's $803 million. Earnings per share grew 129 percent to $0.94 from $0.41 a year ago. Consolidated income applicable to Morgan Stanley grew 91 percent from last year to $1.94 billion.

The latest results included a net discrete tax benefit of $609 million or $0.31 per share, related mainly to the re-measurement of reserves and related interest, the company said. The prior-year earnings included a negative adjustment of some $151 million, or $0.08 per share, related to the purchase of the final remaining interest in the Morgan Stanley Smith Barney Joint Venture.

The latest quarter's results also included positive revenue related to the change in the fair value of certain of the Firm's long-term and short-term borrowings resulting from the fluctuation in the firm's credit spreads and other credit factors, such as Debt Valuation Adjustment or DVA of $87 million, versus the prior year's $175 million.

Excluding DVA, income from continuing operations applicable to Morgan Stanley was $1.9 billion or $0.91 per share, compared to last year's income of $900 million or $0.37 per share.

On average, 24 analysts polled by Thomson Reuters expected earnings of $0.55 per share for the quarter. Analysts' estimates typically exclude special items.

Excluding DVA and the net discrete tax benefit of $609 million, net income applicable to Morgan Stanley for the current quarter was $1.3 billion, which represents an increase of 46 percent from the prior year quarter.

Consolidated income from continuing operations before tax grew 11 percent to $1.99 billion.

Quarterly net revenues were $8.61 billion, 1 percent higher than $8.52 billion a year before. Excluding DVA, net revenues reached $8.52 billion, compared with $8.34 billion a year ago. Analysts expected revenues of $8.19 billion for the quarter.

In the quarter, institutional securities division's net revenues reflected continued strength in Investment Banking and Equity sales and trading, and lower performance in Fixed Income & Commodities sales and trading due to lower market activity, the company noted.

In pre-market activity, Morgan Stanley shares are gaining $0.55 or 1.69 percent, and trading at $33.05.